Use of reference pricing is likely to grow

Reference pricing--a cap on what payers would cover for certain medical procedures--is slowly gaining traction in the healthcare sector, Kaiser Health News reports.

The California Public Employees Retirement System (CalPERS) has saved some $6 million with a $30,000 cap on what it would pay for knee and hip replacement surgeries, with the patients paying any differences out of their pockets. The patients themselves have saved $600,000 in out-of-pocket costs to date. CalPERS has since used reference pricing for colonoscopies, cataract surgeries and arthroscopic procedures. And Anthem Blue Cross of California, which works closely with CalPERS, was able to drop the average cost of a hip replacement surgery by about 20 percent through the use of price caps.

Partly as a result, more large employer groups are taking a closer look at the practice of reference pricing in order to save money regarding medical care.

Reference pricing works best for non-emergency procedures where prices vary widely from facility to facility, with experts noting that higher prices do not necessarily translate to better outcomes or a higher quality of care, according to KHN.

The Obama administration earlier this year approved the use of reference pricing for a variety of medical procedures in the hopes of bringing down costs for certain healthcare procedures.

Despite the savings reaped by an organization such as CalPERs, other organizations remain skeptical of the practice. A recent study issued by the National Institute for Health Care Reform concluded that reference pricing only cut costs by about 5 percent among a group of more than 500,000 autoworkers and their dependents.

"It was surprising that even with all that pricing variation, reference pricing doesn't have a more dramatic impact on spending," RAND Corp. researcher Chapin White, who was lead author of that study, told KHN.

To learn more:
- read the Kaiser Health News article